Requirement 1: Prepare a performance report with a flexible budget and a static budget.
To prepare the performance report, we need to compare the actual results with both a flexible budget and a static budget.
Flexible Budget:
To create a flexible budget, we need to calculate the budgeted variable cost per unit and apply it to the actual output (2,700 tires). The fixed costs remain the same.
1. Budgeted Variable Cost per Tire:
Total Variable Costs / Total Output
Budgeted Variable Cost per Tire = $210,600 / 2,700 = $78
2. Flexible Budget:
Flexible Budget = (Budgeted Variable Cost per Tire * Actual Output) + Total Fixed Costs
Flexible Budget = ($78 * 2,700) + $49,000
Flexible Budget = $210,600 + $49,000
Flexible Budget = $259,600
Static Budget:
The static budget remains fixed and does not adjust for changes in output.
Static Budget = Budgeted Variable Costs + Total Fixed Costs
Static Budget = $210,600 + $49,000
Static Budget = $259,600
Requirement 2: Comment on the results in requirement 1.
Comparing the results of the flexible budget and static budget:
Actual Sales Revenue = Actual Output * Selling Price per Tire
Actual Sales Revenue = 2,700 * $117
Actual Sales Revenue = $315,900
1. Flexible Budget:
- Flexible Budgeted Sales Revenue = (Budgeted Selling Price per Tire * Actual Output) = ($117 * 2,700) = $315,900
- Flexible Budgeted Variable Costs = (Budgeted Variable Cost per Tire * Actual Output) = ($78 * 2,700) = $210,600
- Flexible Budgeted Fixed Costs = Total Fixed Costs = $49,000
- Flexible Budgeted Profit = Flexible Budgeted Sales Revenue - (Flexible Budgeted Variable Costs + Flexible Budgeted Fixed Costs) = $315,900 - ($210,600 + $49,000) = $56,300
2. Static Budget:
- Static Budgeted Sales Revenue = Budgeted Sales Price per Tire * Actual Output = $117 * 2,700 = $315,900
- Static Budgeted Variable Costs = Budgeted Variable Costs = $210,600
- Static Budgeted Fixed Costs = Total Fixed Costs = $49,000
- Static Budgeted Profit = Static Budgeted Sales Revenue - (Static Budgeted Variable Costs + Static Budgeted Fixed Costs) = $315,900 - ($210,600 + $49,000) = $56,300
The results from both the flexible budget and static budget show a profit of $56,300. The actual sales revenue, total variable costs, and total fixed costs all match the information provided.
It can be concluded that the company's performance is in line with the budgeted expectations, as the actual results align closely with the intended goals outlined in both the flexible and static budgets.
2020 were 2,700 tires manufactured and sold at a selling price of $117 per tire. The actual total variable costs were $210,600, and the actual total fixed costs were $49,000. Read the requirements. Requirement 1. Prepare a performance report with a flexible budget and a static budget. Requirements 1. Prepare a performance report with a flexible budget and a static budget. 2. Comment on the results in requirement 1.
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